Category: mergers

KENYA: AIRTEL//TELKOM KENYA MERGER CONDITIONS TAKEN ON APPEAL

Posted on by Editor

By Ruth Mosoti

In December 2019, the CAK approved the merger between two Kenyan telecom firms, Airtel and Telkom Kenya, subject to a number of wide ranging conditions.

The merging parties, however, were not satisfied with the conditions and have decided to take the CAK’S decision on review to the Competition Tribunal. Kenya’s Competition Tribunal was fully constituted and became operational in May 2019 after four members were appointed to the panel.

In terms of  the Kenyan Competition Act, any party aggrieved by a decision of the CAK in relation to a merger has 30 days to file for a review of that merger before the Tribunal. The 30 days period commences from the date the CAK’s decision is published in the gazette. Accordingly, although the merger was formally approved in October 2019, the merging parties had to wait until December 2019 for the gazette, containing the CAK’s decision, to be published before a notice for review could be filed.

The Tribunal has a broad range of powers and may overturn, amend or confirm the decision of the CAK. The Tribunal may also, if it considers it appropriate to do so, refer the matter back to the CAK for reconsideration of certain issues.

Turning to the conditions themselves, one of the contentious conditions relates to having the spectrum revert back to the government upon expiry of the merging parties’ license.

This is concerning as it is the Communications Authority of Kenya that issues and renews licences. The spectrum allocation by Communication Authority is an asset in the hands of the holder. Assuming that the spectrum is being utilized in accordance with the licence, ordinarily renewal is guaranteed.

The CAK’s decision that the license must revert back to the government is concerning as it seems to overlap with the Communications Authority’s mandate. John Oxenham, a director of Primerio, says that the interplay and conflict between the roles of competition and communications agencies are not unique to Kenya. In South Africa there have also been a number of issues which have raised as to which agency is best suited to assess ‘competition law matters’. A memorandum of understanding between the South African Competition Commission and the Independent Communications Authority of South Africa (ICASA) has been concluded in an effort to ensure consistency and enhanced collaboration between the two agencies in this regard.

The CAK’s conditions in this merger seem to be at odds with the CAK’s approach adopted in previous matters. For instance, when Yui exited the Kenyan market, both Airtel and Safaricom acquired Yu’s assets (including licenses). Although Safaricom had a larger chunk of the 2G spectrum, the CAK did not seem to take Safaricom’s market size into account when these assets were acquired. Perhaps the CAK appreciates that there was a missed opportunity.

This is will be the Tribunal’s first opportunity to review the CAK’s decision relating to a  merger and it will be interesting to see how robustly the Tribunal scrutinizes the CAK’s decision with reference to economic evidence. As competition lawyer Michael-James Currie points out, unfortunately, the CAK does not publish detailed reasons which underpin its decisions and it is, therefore, often difficult to fully appreciate the CAK’s reasoning or assess whether the CAK’s decision is sufficiently supported by the underlying evidence. Hopefully the Tribunal’s reasons in this matter will be more comprehensive, thereby contributing positively to creating precedent.

Currie also points out that the CAK imposed a public interest condition relating to a moratorium of any merger specific retrenchments for a two year period. The merging parties are appealing this condition as well and have proposed that the moratorium be reduced to 12 months. The role of public interest factors in merger control has been materially influenced by the South African merger control regime where employment related conditions are a common feature in merger conditions. Moreover, two year moratoriums is usually the ‘benchmark’ standard although moratoriums ranging from 3-5 years have also been imposed on parties in South Africa. It will be interesting to gauge the Tribunal’s approach to public interest factors and whether we will see a unique approach to the assessment of such conditions or whether the Tribunal is likely to follow the South African approach.

[Ruth is a Primerio competition law practitioner based in Nairobi, Kenya.]

 

 

Egyptian taxi saga: antitrust watchdog reverses course on $3.1 billion Uber acquisition

Posted on by Editor

Enforcement Update: Kenya Competition Authority imposes administrative penalty for gun-jumping (prior implementation of a merger)

Posted on by Editor
  • update by Michael-James Currie

In September 2019, the Competition Authority of Kenya (CAK) formally penalised two merging parties for having implemented a transaction without having obtaining the requisite prior regulatory approval.

The trigger for mandatory notification in this case was a change from joint control to sole control when Patricia Cheng acquired an additional 50% of the shareholding in Moringa School.

The maximum penalty which may be imposed for prior implementation is 10% of the parties’ combined turnover in Kenya. In this case, the CAK imposed a nominal penalty (approximately USD 5000) in light of the parties having voluntarily notified the CAK of their failure to obtain prior approval, having co-operated with the CAK’s investigatory agency and after having subsequently assessed the transaction, the CAK concluded that the merger was unlikely to have any adverse effects on competition and would have positive public interest benefits.

The public interest benefits included the fact that the school would offer coding technology to over 1000 students and employees over 100 staff members.

In light of the mitigating factors, the CAK found that the penalty was balanced taking into account principles of deterrence and proportionality of the infringement.

The case is noteworthy not only because it signals a clear message from the CAK that the prior implementation of mergers will attract penalties (which are likely to increase substantially as firms ought to have greater awareness of the merger control regime in Kenya) but also confirms that a move from sole to joint control of an entity or, as in this case, a move from joint to sole control, requires mandatory notification to the CAK.

The CAK has one of the most effective merger control regimes in Africa and is increasingly becoming a more robust competition agency from an enforcement perspective.

[Michael-James Currie is a competition lawyer practising across the majority of sub-Saharan African jurisdictions]

Kenyan Competition Watchdog suspends Telkom Kenya / Airtel deal

Posted on by Editor

Multiple regulatory agencies, competitor complaints and public interest concerns has posed a significant impediment to the proposed merger between Telkom Kenya and Airtel.

The Competition Authority of Kenya (CAK) recently announced that the Kenyan Ethics and Anti-Corruption Commission (EACC) is investigating Telkom Kenya amidst allegations of corruption in relation to historic transactions which gave rise to the current shareholding in Telkom Kenya.

The CAK’s decision to suspend the assessment of the merger was announced approximately a week after the Communications Authority of Kenya also suspended its assessment of the transaction pending the outcome of the EACC’s investigation.

The Communications Authority’s investigation will likely include an assessment of a complaint filed with the agency by Safaricom, a competitor to the merging parties.

Furthermore, the deal was also opposed by certain Telkom employees, ostensibly on the basis that their jobs were at risk should the deal go ahead.

Accordingly, the parties appear to have a long road ahead of them before clearance to implement the deal is granted.

The proposed transaction has no doubt attracted an additional degree of scrutiny as the telecom sector in Kenya is a significant market and there have been a number of disputes regarding the CAK’s jurisdiction to assess anti-competitive conduct, particularly abuse of dominance conduct, in this sector. A study into the telecom sector prepared by the Communications Authority was presented to Parliament in 2018. The CAK objected to the findings and remedial actions contained in the report which the CAK argued would amount to “price regulating” by the Communications Authority. Instead, the CAK urged the Communications Authority to focus rather on features of the market which raise barriers to entry or preclude effective competition between competitors.

While Parliament has, as far back as 2015, urged the Communications Authority to consult the CAK before making any determination regarding a telecom service providers’ “dominance”, subsequent litigation led to a High Court ruling in 2017 which confirmed that the Communications Authority’s powers vis-à-vis competition related matters remain vested exclusively with the Communications Authority.

The concurrent jurisdiction between the CAK and the Communication’s Authority has created somewhat of an enforcement discord – at least in so far as assessing abuse of dominance cases are concerned.

The fact that both the CAK and the Communications Authority have decided to suspend their assessments of the proposed merger following the outcome of the EACC’s investigation suggests that the outcome of the EACC’s investigation is relevant to both the CAK and Communication Authority analysis of the proposed transaction. This in turn, seemingly appears that there is at least an overlap in relation to the key issues under assessment by the respective agencies. Assuming there is indeed an overlap between the CAK and the Communication Authority’s assessment of the proposed transaction that naturally raises the risk of having two agencies come to different conclusions based on the same facts.

Telkom Kenya, however, remain confident that the merger will ultimately be cleared by all regulators.

Telkom Kenya have indicated that the merger will have significant pro-competitive and pro-public interest benefits which will have a positive impact on employees (and the market more generally). Whether the CAK conducts a comprehensive assessment between the short term negative impact on employment versus long term positive impact remains to be seen.

Assuming the proposed deal does not raise any traditional competition issues, it cannot therefore be ruled out that the transaction will be approved subject to public interest related conditions regarding retrenchments and/or re-employment obligations.

Whatever decision is ultimately reached, one hopes that the authorities will publish detailed reasons based on a robust assessment of the evidence in order to provide greater objectivity and transparency as to the analysis which is undertaken by the CAK when analyzing a merger – both from a competition and public interest perspective.

The CAK has in the past number of years have made significant positive strides forward in this regard and is deserved of the recognition it receives as one of the most active and robust competition authorities in Africa.

[Michael-James Currie is senior contributor to AAT and a practicing competition lawyer who has assisted clients with competition law related matters in multiple jurisdictions across Africa]

 

 

 

 

 

 

 

 

 

Beyond Pure Competition Law – Is Africa Leading the Way Forward in Antitrust Enforcement?

Posted on by Editor

To all our Africanantitrust followers, please take note of the upcoming American Bar Association webinar on 2 July 2019 (11amET/4pmUK/5pm CET) titled:

“Beyond Pure Competition Law – Is Africa Leading the Way Forward in Antitrust Enforcement?”

In what promises to be a highly topical (telecon) panel discussion, Eleanor Fox, Andreas Stargard, John Oxenham, Amira Abdel Ghaffar and Anthony Idigbe will:

  • provide critical commentary of the most recent developments in antitrust policy across the African continent;
  • highlight the most significant legislative amendments and enforcement activities in Africa; and
  • analyze some of the key enforcement decisions.

South Africa, Nigeria, Egypt, COMESA and Kenya are among the key jurisdictions under the microscope.

Practitioners, agency representatives, academics and anyone who is an antitrust enthusiast will find this webinar to be of great interest. Not to mention companies actually active or looking to enter the African market place.

For details on how to participate, please follow this Link

 

 

 

 

 

 

Minister Ebrahim Patel will no longer be a Member of Parliament: What does this mean for Competition Policy in South Africa?

Posted on by Editor

According to recent reports, Minister of the Department of Economic Development, Ebrahim Patel, will not be sworn in as a member of Parliament despite initially being listed on the African National Congress’ (ANC) Members of Parliament list.

[see https://www.businesslive.co.za/bd/politics/2019-05-15-ebrahim-patel-and-senzeni-zokwana-fail-to-make-it-back-to-parliament/%5D

Since Cyril Ramaphosa was voted as the ANC’s President, and hence South Africa’s President, there had been increasing speculation regarding where Minister Patel would complement Ramaphosa’s economic policies. With many political commentators initially expected Ramaphosa to relieve Patel of his position as the Minister of Economic Development soon after taking over the presidency reins, it appeared that Patel had convinced Ramaphosa that he was an integral part of the team. Patel even accompanied Ramaphosa as part of the “special economic envoy” on a series of international road shows promoting and encouraging foreign investment in South Africa.

At this stage it is not clear what the reasons are for Patel not forming part of the ANC’s list of Members of Parliament (a prerequisite to serving as a Cabinet Minister unless Patel serves as one of the two non-MP’s allowed to serve in Cabinet) ). Following the national elections on 8 May 2019, however, Ramaphosa has indicated that he is intent on reducing the size of the Cabinet which would necessarily require various government departments and portfolios to be consolidated. It may be that the Department of Economic Development (EDD) is consolidated with the Department of Trade and Industry (DTI). If this were the case, the South African competition authorities would then also fall under the auspices of the DTI and no longer under the EDD. Many of our readers may recall that the competition authorities previously fell under the policy stewardship of the DTI.

While it may be too early to speculate what the ramifications of Patel’s departure could mean for competition policy and enforcement in South Africa, John Oxenham, director at Primerio, says that “Minister Patel was one of the key proponents behind elevating the role of public interest considerations in merger control. The minister’s intervention in numerous transactions, particularly international deals has resulted in public interest conditions, the scope and nature of which, pushed the outer most limits of what is appropriate in competition policy when assessed against international standards”.

Minister Patel’s reputation for engaging in robust opposition to mergers prompted Ab-Inbev directors to engage directly with Patel rather than the Competition Commission in order to secure public interest related conditions which would placate the Minister – all in the hope of ensuring that the transaction sales through the merger control process unchallenged. Which it largely did.

Fellow competition lawyer, Michael-James Currie, says that another key element of Patel’s departure relates to the Competition Amendment Act which was signed into law by President Ramaphosa in February 2019. Currie says that “although the Act has been signed into law, the enforcement of a number of the provisions of the Amendment Act remains unclear. For example, there are draft guidelines published in relation to the “price discrimination” and “buyer power” provisions of the Amendment Act which completely do away with any standard of “adverse effect on competition” and even the “consumer welfare” standard is of no relevance when small, medium or historically disadvantaged persons may be affected. Currie says Patel’s departure may spark a fresh round of debate and submissions in relation to the draft regulations. Submissions which previously appeared to largely be ignored by Patel.”

Oxenham echoes Currie’s sentiments and is of the view that the Amendment Act, which was largely driven by Patel, may ultimately be interpreted and enforced by the competition agencies in a manner which is more consistent with international best practice. Of course, this would depend on who replaces Patel and whether there is a different policy view as to the role of competition law in South Africa by Patel’s successor.

A key concern raised by numerous commentators is that the subjectivity of public interest assessments together with the increasing intervention by the executive to extract non-merger specific public interest related conditions, particularly in foreign transactions, does little to boost South Africa’s image as being open to foreign investment.

While the on-going debate of the role of public interest considerations in merger control will continue well beyond Patel’s tenure as Minister of the EDD, the entire South African competition community will be watching closely Ramaphosa’s final Cabinet announcement as this would likely be the clearest indication of whether we could expect a material policy direction change fin South Africa insofar as competition law enforcement is concerned.

 

 

 

 

 

 

 

Plus ça change… Merging parties should continue as before in Nigeria

Posted on by Editor

FCCPA in effect – but not quite, as FCCPC not yet fully operational

As AAT reported previously, the landmark Federal Competition & Consumer Protection Act (FCCPA) that suddenly went into effect in Nigeria earlier this year has not quite been operationalised.  Notably, the agency that is supposed to be tasked with enforcing the FCCPA, the Federal Competition & Consumer Protection Commission (FCCPC) is currently “undergoing construction”, so-to-speak.  An African competition-law practitioner with Primerio notes that “apparently there has been some political wrangling around the constituents of the FCCPC’s Board,” which is unsurprising, to say the least.  One might be inclined to say, Plus ça change, plus c’est la même chose…, as politics has always played a major role in Nigerian enforcement.

That said, the AAT editor does understand that, at a minimum, the Director General of the existing Consumer Protection Council, Babatunde Irukera, will serve in some capacity with the FCCPC — it is unknown whether the remaining 5 CPC commissioners will likewise continue to act for the FCCPC or not.  (Screenshots of his Twitter account below, indicating a full-blown transition from the CPC to the FCCPC).

One indication of the lack of the FCCPC’s operational status when it comes to mergers is that its web site (presumably soon to be http://fccpc.gov.ng/) still yields an error message.  Another is a recent joint statement issued by the SEC and its yet-to-be-established counterpart, which provides in relevant part as follows:

In order to ensure continuing and seamless commercial transactions and market operations, SEC and FCCPC have come to a mutual understanding with respect to these transactions within the transition period, which pursuant to this notice commences immediately, and shall remain in force until otherwise discontinued by further Advisory or Guidance.

During this transition period, starting today, May 3rd, 2019:

  • All notifications or fillings will be reviewed under existing SEC Regulations, Guidelines and Fees.
  • Notifications will be filed at FCCPC OR SEC/FCCPC Interim Joint Merger Review Desk at SEC.
  • All applicable fees will be paid to the FCCPC.
  • SEC and FCCPC will jointly review notifications and FCCPC will convey decisions with respect to the notifications.

Notifications previously received by SEC, but yet to be decided, will be subject to the interim process above and FCCPC will convey the decisions accordingly.

We will update AAT’s readership with new intel as soon as it becomes available.  For the time being, the status quo remains largely intact.  Says Andreas Stargard, an antitrust practitioner:

“For now, merger parties should proceed as before, namely: analyse your transaction under the Investment & Securities Act (ISA), and file with either the SEC or the FCCPC — some advise to file with the SEC for the time being, if applicable, as the lack of full operational status of the FCCPC does not bode well for procedural thoroughness or guaranteed document retention in this early phase.  That said, if your transaction has a longer time horizon, with closing potentially several months down the road, your counsel should take into account the very real possibility of there being a notification under the FCCPA, even if none was required under the ISA.  I expect the FCCPC to set merger notification thresholds very soon.”

Osayomwanbor Bob Enofe, an academic and proponent of the Nigerian competition law notes, however, that the current interim arrangement “only suggests to me that the SEC currently leads, concerning merger enforcement in Nigeria, rather than clarifying that the FCCPC is not existent (especially given the transitional period established by the two Commissions).”  He continues: “The erstwhile CPC might be revamped to reflect a more competition-law cognisant staff base,” noting that “various competition law offences now exist in Nigeria,” of which cartel conduct is punishable not only my monetary fines but also criminally under the FCCPA.

GCR Matter of the Year 2019 awarded to AG deal with significant African dimension

Posted on by Editor

Primerio’s Merger Team First to Obtain Clearances on Bayer’s $66 Billion Monsanto Acquisition

The Global Competition Review 2019 GCR Awards honoured the companies and their in-house and outside counsel responsible for shepherding the massive agriculture transaction through the multi-jurisdictional merger-control processes around the globe.  The Bayer/Monsanto (with divestitures to BASF) merger garnered overall “Matter of the Year” as well as “Merger Control Matter of the Year” in Europe.  The ceremony took place in Washington, D.C., during the annual ABA Spring Meeting antitrust conference.

The legal team advising St. Louis-based Monsanto on all African competition approvals was led by John Oxenham and Andreas Stargard, ably assisted by attorneys in 4 African jurisdictions — South Africa, COMESA, Tanzania, and Kenya.  The Primerio lawyers had the unique distinction of obtaining the first out of dozens of required clearances.

Monsanto Africa counsel, Stargard and Oxenham
Monsanto Africa counsel, Stargard and Oxenham, of Primerio

October Antitrust Conference Shines Spotlight on Africa

Posted on by Editor

New York Concurrences conference: Focus on emerging economies, “coping with nationalism and building inclusive growth”

AAT invites its readers to sign up for what promises to be a timely and topical conference in NYC this October 26, 2018, at NYU Law School.  Program below, sign-up with Eventbrite here.  The event features the SACC’s Commissioner Tembinkosi Bonakele as well as professor Simon Roberts from the Univ. of Johannesburg.

08.15 am

Registration & Breakfast

 8:45am

Opening Keynote Speech

Joseph STIGLITZ  

Nobel Prize-Winning Economist | Professor, Columbia University, New York  

9:30am

Competition, Industrial Policy and Developing Countries

Noah BRUMFIELD | Partner, White & Case, Washington DC

Dennis DAVIS | President, Competition Appeal Court of South Africa, Cape Town

Kirti GUPTA | Senior Director, Economic Strategy Qualcomm, San Diego

Frédéric JENNY | Chairman, OECD Competition Committee, Paris

Simon ROBERTS | Professor, University of Johannesburg, Johannesburg

Moderator: Eleanor FOX | Professor, NYU School of Law, New York

 11:00am

Coffee Break

11:15am

Mega Mergers and Developing Countries

Tembinkosi BONAKELE | Commissioner, South Africa Competition Commission, Pretoria

Marcio DE OLIVEIRA JR | Senior Consultant, Charles River Associates, São Paulo

Gönenç GÜRKAYNAK | Partner, ELIG Gürkaynak Attorneys-at-Law, Istanbul

Nicholas LEVY | Partner, Cleary Gottlieb Steen & Hamilton, London

Ioannis LIANOS | Professor, University College London

Moderator: Harry FIRST | Professor, NYU School of Law, New York

 12:45pm

Lunch

1:45pm

BRICS: A Competition Agenda? 

Alexey IVANOV | Director, HSE-Skolkovo Institute for Law and Development, Moscow

Ruchit PATEL | Partner, Ropes & Gray, London

Cristiane SCHMIDT| Commissioner, CADE, Brasília

Xianlin WANG | Professor, Shanghai Jiao Tong University, Shanghai

Moderator: Daniel RUBINFELD | Professor, NYU School of Law

 3:15pm

Coffee Break

3:30pm

Enforcer’s Roundtable: What’s Under the Radar?

Roger ALFORD|Deputy Assistant Attorney General, US DOJ, Washington DC

Tembinkosi BONAKELE | Commissioner, South Africa Competition Commission, Pretoria

Randolph TRITELL | Director, Office of International Affairs, US FTC, Washington DC

Joseph WILSON | Adjunct Professor, McGill University, Montreal | Former Chairman, Competition Commission of Pakistan

Moderator: Frédéric JENNY| Chairman, OECD Competition Committee, Paris

5:00pm

Closing Wrap-up: New York Minute

Eleanor M. FOX | Professor, New York University School of Law

Harry FIRST | Professor, New York University School of Law

5:15pm

Cocktail Reception 

 

South Africa Competition Tribunal: Merging Parties Penalised for Failure to Comply with Public Interest Conditions

Posted on by Editor

By Michael-James Currie

On 29 June 2018, the South African Competition Tribunal (Tribunal) penalised the RTO Group R75 000 for failing to comply with the Tribunal’s conditional merger approval in respect of two companies now within the RTI stable, Warehouseit and Courierit. The Tribunal approved the large merger in August 2015.

In terms of the Tribunal’s merger approval, a moratorium on merger specific retrenchments for a two year period was imposed – now a frequently imposed public interest related condition by the competition agencies in South Africa.

RTI, however, was penalised not for retrenching any employees during this window but for failure to adhere to the monitoring obligations as set out in the Tribunal’s conditional approval certificate.

In this regard, the merging parties were obliged to notify their employees (and Courierit’s subcontractors) of the conditions to the merger approval within five days of the merger approval date. The merging parties were also obliged to provide the Competition Commission with an affidavit confirming that the obligations in terms of the conditions had been complied with.

By way of a consent order, RTI admitted that it failed to comply with its monitoring obligations and agreed to pay an administrative penalty for breaching the Tribunal’s conditional merger approval.

Although there have been a limited number of cases in respect of which an administrative penalty has been imposed for a breach of the merger conditions, this case demonstrates the importance of fully complying with the terms set out by way of a conditional merger approval.

Furthermore, although notifying the employees of the relevant conditions may not have been a particularly onus obligation, merging parties should take particular cognisance of monitoring and reporting obligations when negotiating conditions with the Competition Commission. Merging parties understandably place greater emphasis on the substantive aspects of the conditions and may underestimate the reporting obligations related thereto – particularly if conditions are being negotiated at the eleventh hour (which is not uncommon).

While there are mechanism’s available to merging parties to remedy any patently unworkable aspects contained in merger approval conditions, it is advisable to ensure that the conditions are practical and capable of being adhered to in full prior to being finalised – assuming the merging parties have that luxury.

[Michael-James Currie is a South African based competition lawyer and practices across Sub-Saharan Africa]